joshbaumgartner

Round Rock, TX, a suburb of Austin, has decided to pay IKEA $5 million to move in. This struck me as worthy of question. This isn't a re-hash of the old debate about a Ford plant or a new sports team moving into town. What got me about this one was that it was a retailer, with unique economics associated. But the town officials were saying the standard old lines about bringing in new money and jobs to the city, and particularly hilighting the increase in property value added to the city's rolls.

While I find a lot of valid arguments in why a community should vie for a manufacturing entity, and while sports teams have their own unique arguments for and against offering incentives to them, I don't know that it makes sense with a retailer. My logic is that for example, a Ford plant will build cars that are sold globally, bringing that economic stream through the city, but a retailer doesn't really bring in money to the town from outside like that, but instead almost the opposite. Retailers offer goods and services to the town and take revenue from it. Local ones keep that revenue there, but larger ones distribute a good amount of it from the city to outside.

Does it make sense to pay a big retailer to set up shop in your town?

Charlatan

I don't know if it makes sense to pay to have a retailer set up shop but there are things to consider:

1) Ikea will provide jobs
2) Those jobs will pay into the tax base
3) I bet there is a study that corelates the precense of an Ikea (or similar box stores) to an increase in housing starts and/or renovations. Property tax increasing.
4) I'm not certain Ikea qualifies but there is a direct relationship between quaint shopping districts and the increase in property values or gentrification


Again, I don't know if these things apply in this instance but there is a good chance that some if not all of these points play a factor in the decision making process.

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aberkok

To me it just seems like helping the big guys get bigger, while the smaller businesses that make life more diverse and interesting get swallowed up or swept away. I realize there are benefits like jobs, but if things continue this way everyone'll be working for Ikea!! It also increases consumption and way more people are buying crap they don't need.

That is my gut emotional response....bring on the economists (like my dad)...

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Redlemon

Here's a link to an audio/text report: NPR : 'Jobs Scam' Costs Taxpayers, Author Says. I heard it, it is pretty persuasive. From the text on the site:

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Seaver

I live in Austin. This is going to be within a rock throw's of Dell. Not just a factory, but THE factory.

Dell has been HUGE for Austin. We are now considered the biggest technological boom in the country (not up to Silicone Valley, but growing at a faster rate). Because of them, Texas Instruments (calculator manufacturer) has also moved in, and we're becoming a hub for technology research in the South.

To understand our area you must understand that. Round Rock is one of the biggest booming cities (was barely a town 10 years ago) in Texas, they see this as an added boost.

I support their attempt at growing their city, however for those of us who are local it's a big pain in the ass. Because Austin is VERY liberal in a conservative state, they have steamrolled any/all attempts to seriously combat the congestion of the city. From making a loop around the city, to even creating a toll road. The problem is Austin and Round Rock sit on I-35, which runs from Canada all the way down to Mexico, so we have a LOT of traffic through the cities ontop of simple city traffic. THIS is what concerns people around here, everyone knows it'll bring in more money than it will cost if you simply count increased tax revinues, but it'll require a huge construction boom on a stretch of highway already streched to its limit with a hard fight to do anything about it.

joshbaumgartner

Seaver, I live in Pflugerville myself...that's how I caught the story.

djtestudo

A couple years ago Prince George's County in MD did some infastructure work in order to have an Ikea built in College Park, including rerouting traffic and giving it direct access from the ramps to and from the Capital Beltway.

I think part of it is Ikea is BIG business; it's almost its own attraction.

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xepherys

I believe it's reasonable. First of all, IKEA is not an American Corporation. Remember this before going on the rich get richer tirade. It's an imported chain that does well in this country. On that note it provides jobs, and draws people in from nearby. I know of people personally that will drive 30 miles one way to go to the closest IKEA. I'd imagine some folks probably drive even further.

Also, big businesses bring other big businesses. Best Buy and Circuit City and JC Penney's and several restaurant chains all use the same marketing groups that study areas that are ripe to provide them with business. It's more purposeful than one might think that those types of stores are generally bundled together despite being competitors. If an IKEA goes in, then maybe a Lowe's follows. With a Lowe's and an IKEA, maybe some chain restaurants land nearby. Well, with this type of shopping, a strip mall or two opens up and maybe a small commercial district for local offices. This brings in more money and more people. These people need entertainment, so a new movie theatre and additional restaurants pop up bringing more money into the local economy and more jobs. Now all this turns into a mall area, and perhaps a legitimate mall forms with department stores. Ad Nauseum...

So... how is this BAD for a town?

jorgelito

Hmmm...my only complaint is why the $5 milliion payout? Does the city recoup the money ( not just from sales taxes)? I actually, really don't know as I'm no good at running numbers. but if someone ran the numbers and it was win-win then hey why not?

But then again, there are no guarantees right?

Anyways, I don't think the govt. should be involved in business, especially retail.

aberkok

I've seen the soul slowly being sucked out my hometown of Kingston, Ontario because of big box business like Ikea. The strip malls have taken business away from what used to be a vibrant downtown core. What used to be beautiful rolling plains have now been paved over with parking lots and I'm sure the wildlife has suffered.

Peoples' ability to walk has increasingly diminished. These strip malls are generally too far from residental areas to walk so people become increasingly car dependent (since there's nowhere left to walk to). Almost everyone I know in Kingston is shocked when I say I'm walking somewhere, because it seems so far to them. Housing developments spring up around these strip malls and these days it seems like every house is the same, without individual character, like a scene out of Edward Scissorhands.

So no, I don't believe that towns should pay retailers to set up shop.

Sure, Ikea isn't an American business, but that does not exclude them from the "rich get richer" paradigm.

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